Kidney Friends from the payment of value-added tax

(VAT) passed on to you by The Thirdline, Inc.

TDCcAE

October 14, 2010

BIR RULING NO. 104-10

Section 105;
BIR Ruling
No.
VAT-006-07
Kidney Friends for Rehabilitation through
Integrated Employment & Educational Endeavors, Inc.
Unit 108 No. 77 Malakas Street
Pinyahan, Quezon City
Attention: Ms. Benita S. Padilla, M.D.
President
Gentlemen :
This refers to your letter dated July 7, 2008
requesting on behalf of Kidney Friends for Rehabilitation
through Integrated Employment & Educational Endeavors,
Inc. ("Kidney Friends" for brevity) for a ruling exempting
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As represented, Kidney Friends is a non-stock,

non-profit organization duly registered with the Securities
and Exchange Commission (SEC) under SEC Registration
No. CN200802520 dated March 12, 2008 and the Bureau
of Internal Revenue under Certificate of Registration No.
*(1) February 21, 2008.
On June 9, 2008, Kidney Friends would be
sponsoring a fundraising concert entitled "Kidney Friends
nAPO Sila" at the Music Museum. The proceeds thereof
will be used to implement Kidney Friends' program to
patients with kidney problems. In line, with the aforesaid
concert, Kidney Friends engaged the services of The
Thirdline, Inc., a Talent Management and Concert
Production outfit.
In reply, please be informed that Section 105 of the
Tax Code of 1997, as amended provides that any person
who, in the course of trade or business, sells, barters,
exchanges, leases goods or properties, renders services, and
any person who imports goods shall be subject to the VAT
imposed in Sections 106 to 108 of the same Code.
The phrase "in the course of trade or business"
1

means the regular conduct or pursuit of a commercial or an

economic activity, including transactions incidental thereto,
by any person regardless of whether or not the person
engaged therein is a non-stock, non-profit private
organization (irrespective of the disposition of its net
income and whether or not it sells exclusively to members
or their guests), or government entity.
In a decision of the Supreme Court in the case of
Commissioner of Internal Revenue vs. Court of Appeals
and
Commonwealth
Management
and
Services
Corporation, G.R. No. 125355, March 30, 2000, the High
Court had occasion to rule as follows:
"Contrary to COMASERCO's contention,
the above provision clarifies that even a
non-stock, non-profit organization or government
entity, is liable to pay VAT on the sale of goods
or services. VAT is a tax on transactions, imposed
at every stage of the distribution process on the
sale, barter, exchange of goods or property, and
on the performance of services, even in the
absence of profit attributable thereto. The term 'in
the course of trade or business' requires the
regular conduct or pursuit of a commercial or an
economic activity, regardless of whether or not
the entity is profit-oriented.
ASETHC

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xxx

xxx

xxx

Section 108 of the National Internal

Revenue Code of 1997 defines the phrase 'sale of
services' as the 'performance of all kinds of
services for others for a fee, remuneration or
consideration.' It includes 'the supply of technical
advice, assistance or services rendered in
connection with technical management or
administration of any scientific, industrial or
commercial undertaking or project.'"

Moreover, the VAT is an indirect tax, payable by the

seller and not by the purchaser of goods or services. Being
an indirect tax, the amount of the tax may be shifted or
passed on to the buyer, transferee or lessee of the goods,
properties or services (Section 105, Tax Code of 1997).
Once shifted, it is no longer a tax but an additional cost
which the purchaser has to pay to obtain the goods or
services (Philippine Acetylene Co. vs. Commissioner of
Internal Revenue, G.R. No. L-19707, August 17, 1967, BIR
Ruling No. DA-456-06 dated July 26, 2006)
Applying the above decision, the amount charged by
The Thirdline, Inc. for the performance of services in
connection with the abovementioned concert is subject to
VAT. The VAT may be passed on by The Thirdline, Inc. to
2

Kidney Friends (VAT Ruling No. 006-2007 dated April 23,

2007). Accordingly, your request for exemption from the
payment of the 12% VAT passed on by The Thirdline, Inc.
to Kidney Friends is hereby denied for lack of legal basis.
This ruling is being issued on the basis of the
foregoing facts as represented. However, if upon
investigation, it will be disclosed that the facts are different,
then this ruling shall be considered null and void.

Very truly yours,

(SGD.) KIM S.
JACINTO-HENARES
Commissioner
Bureau of Internal
Revenue

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Endnotes
1 (Popup - Popup)
*

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Note from the Publisher: Copied verbatim from the

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